Venezuela Oil Diplomacy: From Caracas To Cuba

This is TELL ME MORE from NPR News. I'm Michel Martin. Coming up, we'll speak with the Reverend Jim Wallis. He's a well-known evangelical leader. He's known for stepping into the political fray on issues he cares about. So we'll ask him why he chose to step out of the spotlight during last year's presidential campaign. That's later in the program.

But first we want to turn to presidential politics in Venezuela. Voters there are selecting a successor to President Hugo Chavez this weekend. You probably remember that Chavez died of cancer last month. The election is being watched far beyond that country's borders, though, because of some of the policies Chavez implemented about the country's most valuable resource: oil.

Chavez shared the wealth with the Venezuelan people and also with his Caribbean and Latin American neighbors. But whether the country's next president can or will continue those policies is another question. We wanted to talk more about this so we've called NPR's Tom Gjelten, who's been following the situation there. Tom, thanks so much for joining us.

TOM GJELTEN, BYLINE: Hi, Michel.

MARTIN: So we understand that Chavez had designated Vice President Nicolas Maduro as his successor. Is that about - am I phrasing it correctly?

GJELTEN: Oh, there is no question that Nicolas Maduro was Hugo Chavez's choice. He made it very clear. He was, as you say, his vice president, and while Chavez was sick he was actually made the acting president by the powers that be in Venezuela because they knew that Chavez wanted him to succeed him.

MARTIN: And why did he want him to succeed him?

GJELTEN: Because he was loyal. Because he believed in the Chavista division. Because Chavez felt that this was the man that could carry on the program, the ideology, the alliances that Chavez believed in. For example, Maduro is very close to the government in Cuba and that alliance between Venezuela and Cuba was very close to Chavez. Probably there was no one else in the leadership, in the political leadership in Venezuela, that was more closely aligned with Cuba, aside with Hugo Chavez, than Nicolas Maduro.

MARTIN: So I think the question is, can he carry on these policies? I mean one thing that a lot of people are talking about is that Maduro lacks Chavez's charisma so just kind of as a leader he doesn't have one of Chavez's kind of essential qualities. But there are other issues beyond that. Could you talk more about that?

GJELTEN: Well, I think the big thing is that the environment in Venezuela has changed a lot and it would've been even a challenge for Chavez to maintain his popularity, which was phenomenal. I mean he was really a very popular man. He defeated soundly Henrique Capriles, the main opposition candidate in Venezuela in elections just last October, almost without campaigning. Because he was already sick himself.

But Venezuela is facing just a series of really serious economic problems. Inflation - we don't know how much inflation is. It's well above 20 percent inflation. Also, for various reasons, even though Venezuela is, as you said before, a rich country, there are shortages of food. There are shortages of all kinds of basic items. There are long lines, and that's obviously something that the Venezuelan people get very upset about.

Crime is a terrific problem. So just generally the quality of life in Venezuela has really deteriorated. And so, as you say, Maduro has to confront a much more difficult situation than Chavez dealt with during most of his 14 years, without Chavez's charisma.

MARTIN: And it's also true that one of Chavez's main sort of policy tools, the oil prices or the oil wealth, is also in flux right now. Isn't it too? I understand that oil production is going down even though oil prices remain high. Why is that?

GJELTEN: Well, oil is by far the most important - really, the only source of revenue for Venezuela as a country. I mean this is 90 percent of its export earnings. The problem is that all of that oil wealth that Chavez, you know, for political reasons, for ideological reasons, wanted to share that wealth with the people. But that's not the way to really ensure the future of your oil industry.

Any oil industry requires a lot of reinvestment. You've got to maintain your fields. You've got to continue exploration. You've got to invest in new technology. You've got to maintain your drilling infrastructure. You need the technology and the expertise that foreign oil companies represent. And instead of promoting that kind of reinvestment and instead of inviting in the foreign expertise that Venezuela needed, Chavez diverted a lot of that wealth to social programs.

You have ridiculously low gasoline prices in Caracas. We've heard from NPR's Steve Inskeep, who's been visiting Venezuela this week, that gas is 20 cents a gallon or less in Caracas. That is not a productive use of your oil wealth. And, as you said before, he's been sharing this oil at discounted prices with his neighbors.

So instead of reinvesting that money into - at least a portion of it - into the oil industry, he's been diverting it to other places and that means that oil production is going down. I mean in 2012, Michel, the country earned $1 billion less from oil than it earned in 2011, and already in the first quarter of this year oil production has gone down by seven percent.

MARTIN: If you're just joining us, we are talking with NPR's Tom Gjelten. We're talking about Venezuela's presidential elections this weekend. We're also talking about what it could mean for the country's oil diplomacy. Well, among the countries with which Venezuela has shared its oil is the United States. I mean I think many people will remember some of these ads that have run in certain markets around the country where it's subtle but it is made clear that Venezuela is making oil available to low income people at steep discount or for free.

But that's just - I assume that that's just for - mainly for ideological reasons.

GJELTEN: Well, he's very - he was very clever politically, and you know, the United States was making it very clear that U.S. governments, whether it's the Bush administration or the Obama administration, made it clear they did not like Hugo Chavez. They did not like the direction that he was taking Venezuela in. They didn't like all the anti-U.S. rhetoric.

I mean he always talked about the empire, you know, and North American imperialism. So they didn't like that, but Chavez found a way to stick it to the Americans by providing fuel to low income people in the Northeast. And even here in the Washington, D.C. area there are families that benefitted from this fuel oil program. So it was very astute on his part.

MARTIN: Do you assume that those days are numbered, of a program like that? But really, really more broadly, though, there are other countries in the region who depended, I would argue, economically on this discounted oil. Could you talk a little bit about that and what is the future of those arrangements?

GJELTEN: Well, at the top of that list, Michel, is Cuba, which has really - Venezuela under Hugo Chavez replaced the old Soviet Union for Cuba as its main benefactor. Cuba has been getting something like 90,000 barrels of oil a day from Venezuela on steeply discounted terms, actually reselling some of that oil on the open market for hard currency, so earning money.

But not only Cuba. You also had 18 countries in the so-called Petro-Caribbe Alliance, Caribbean and Latin American countries, countries like Haiti, Jamaica, the Dominican Republic, Nicaragua, Guatemala. These are countries that are energy poor. They don't have their own sources of energy. If they have to buy energy on the world market at these high prices, that's terrible for those countries.

And they were getting very discounted supplies of oil from Venezuela. And it would've been very hard for them to sustain their economies without that oil. Haiti, for example, had its entire oil debt to Venezuela forgiven after the earthquake. So it was starting from scratch. That was a very important boon to Haiti.

Now, however, as you say, I mean you can't do it all. You can't hand(ph) almost free gasoline to Venezuelans. You can't spend a lot of money on social programs coming from the oil industry. You can't give oil away to people in Boston and Baltimore and Washington D.C. and to Cuba and to - at some point...

MARTIN: And reinvest in the industry to keep it productive.

GJELTEN: And reinvest in the industry when oil production is going down. At some point you have to make some choices. And who knows? Your question was, what's the future of these grants to people in the United States.

My guess is that, on the list of priorities, that's probably not very high. He has to - Maduro, if he wins, and he's probably going to win. He has to, first of all, pay attention to his own popularity at home, and I'm not sure that homeowners in Washington, D.C. sort of rank that high.

MARTIN: That was where I was going to go next, and for the couple of minutes that we have left, you know, I was wondering, in terms of the voters in Venezuela, the people of Venezuela, what they think about the strategy of oil diplomacy. I mean, you can imagine how, on the one hand, it would be a source of kind of national pride for people, that they're able to play this role in the region and kind of boost the standing of the country and the region.

On the other hand, when there are shortages of food and basic goods - as you've discussed, there is an exodus of skilled workers whenever people can - if people can get out, they are leaving. Do you have a sense of how the people of Venezuela, the voters, feel about the use of their oil wealth in this way?

GJELTEN: I can't claim to have a firsthand sense of that, Michel. We do know that Henrique Capriles, the opposition candidate, has been gaining a bit on Maduro in polls recently, and he has made it very clear in his campaign that he would curtail a lot of that diversion of oil to other countries. So, apparently - I mean, if you're a Venezuelan voter, and you have to choose between, you know, cheap gasoline at a time when prices for everything else are rising and support for social programs in Venezuela, if you have choose between those things and a government program that subsidizes consumers in Haiti or Washington, D.C. or somewhere else, you're probably going to prefer that that money stay at home.

MARTIN: Before we let you go, tell us just a little bit, if you would, about the opposition candidate. I mean, you've made it clear that Maduro has kind of the imprimatur of Hugo Chavez, his - you know, Chavez clearly designated him as his favorite successor, and his kind of popularity has transferred to him, at least for now. But there is an opposition candidate. Could you tell us a little bit more about him?

GJELTEN: His name is Henrique Capriles. He's a governor. He is, himself, a fairly charismatic figure, probably more charismatic than Maduro. And he recognizes the popularity of the Chavez program, and has actually pledged to continue a lot of the priorities that the Chavez government proposed. So he is, unlike some of the opposition candidates that Venezuela has seen in the past, who just presented themselves almost as kind of right-wing versions of Chavez, Capriles seems to be much smarter, politically. He's still got the tremendous disadvantage of not being the designated candidate of the machine. He has to really fight to get air time and to get the kind of attention that Maduro, as the government candidate, is getting. But he has run a fairly effective campaign.

MARTIN: NPR's Tom Gjelten reports on global security and economic issues. He was kind enough to join us in our Washington, D.C. studios - our last broadcast, in fact, at our headquarters here.